You have the ability to make withdrawals from an IRA leading up to retirement, but you may be penalized. You are able to withdraw money from your Traditional IRA at any time (after all, this is your money), but it can be a costly decision. If you decide to take out money before age 59½, you will most likely pay a 10% penalty in addition to regular income taxes on the amount that you withdraw.

As the name Individual Retirement Account implies, the money is meant to be taken out during retirement. There are a few circumstances in which the IRS will allow you to make early withdrawals without assessing the 10% penalty. These exemptions are mostly for hardships, but first time homebuyers can get up to $10,000 out penalty-free, and college tuition costs for family members can usually be withdrawn penalty-free.

Medical expenses that exceed a certain percentage of gross income are also excluded, and you can use IRAs penalty-free to pay health insurance premiums while unemployed if needed. A few other exceptions to the rule exist, but be sure to do your research first.

Again, as a rule of thumb, we encourage you to leave IRAs alone until retirement if possible, to take advantage of the tax-deferred growth.